tarting in the mid '70s and continuing through the latter part of the '80s, New York City was engulfed in the co-
oping craze. As prices spiralled upward, owners of residential property were cashing in by converting buildings from rentals to co-ops.
However, many of the conversions that took place in Brooklyn and Queens in the mid-'80s were effectuated by Johnny come lately's who, to get in on the feeding frenzy, were buying residential properties at high prices, pledging their unsold shares to local lenders, and trying to pyramid their holdings into the proverbial pot of gold.
By 1990, the bottom had dropped out of the real estate market and sponsors who had purchased properties for exorbitant prices and had leveraged their holdings through pledges to local lenders, were beginning to default. The inability to sell apartments, coupled with the negative cash flow resulting from apartments where rent-stabilized and rent-controlled tenants were paying less than the sponsor's maintenance and debt service, brought down many a sponsor's house of cards.
The Sponsor-Co-op Relationship